Armstrong: AT&T will juice its margins

Blasting what they consider misinformation spread by
Comcast, AT&T Chairman Mike Armstrong declared that his cable operation would bring its woeful cash flow margins up that of other operators by the end of 2003.

That would be a dramatic rebound from the 19% margin the company generated during the second quarter, a huge drop from 43% when AT&T first took over Tele-Communications Inc. in 1999. Other cable operators post 40-45% earnings before interests depreciation and taxes.

"We will deliver EBIDTA margins to the industry benchmark within three years," Armstrong said Tuesday during a conference call to take investors on a "deeper dive" through AT&T Broadband's operations. In pushing his $58 billion bid for AT&T Broadband Comcast President Brian Roberts has criticized AT&T cable performance, contending that he could run them far better.

AT&T CFO Chuck Noski blasted back: "There was lot of opinion and speculation rather than information and fact." AT&T Broadband's margins are heading strongly north as expensive new products the company has been deploying start to pay off. AT&T Broadband Chairman Dan Somers said that high-speed Internet service has just started turning a profit and that the company's cable telephone business will do so within nine months.

Of the homes that can get new services, penetration of digital cable has now broken 20%, telephone stands at 14% and high-speed Internet has hit 10%. All of those number are better than that of other operators. "What all this should lead to is really great returns," Armstrong said.
- John M. Higgins